George Osborne certainly knows how to pull fiscal rabbits out of hats. Last year it was inheritance tax proposals that had Labour on the defensive. Today he has proposed to freeze council tax for two years. Be sure, this move will also have ministers scrabbling around for a response. Local taxation is a potent political issue where, having admitted there is a problem, Labour has failed to deliver reform.

Osborne's idea is simple. If a council can keep its annual increase in council tax to 2.5%, the government would then pay the authority sufficient extra grant to ensure it can afford not to increase council tax at all. This will provide local government with a very strong incentive to keep down tax levels, though it will also put pressure on authorities to make real cuts in services. It is surely a signal that the Tories are shifting further back towards being a "low tax, low spend party".

The Tories' slogan will be: "Vote Labour for a 5% council tax hike or vote Conservative for no increase". For millions of people who fall just short of receiving council tax benefit, including a large number of pensioners, this will be an attractive offer. Because people are so aware of it, council tax is unpopular. Any initiative to reduce its impact will win votes.

Such a step will also underline the Labour party's 11 years of failure to address the problem of local taxation. The government now sets a council tax limit for all authorities. A revaluation was cancelled via a spectacular U-turn after the Conservatives had led the way by stating that they would not revalue the tax base. Both Nick Raynsford and Sir Michael Lyons have undertaken official inquiries, yet no reforms have subsequently occurred.

Of course, the Conservatives' proposals are not a proper reform, simply a short-term palliative to win popularity. The Treasury would have to fund the £500m cost of the scheme by "reducing spending on expensive private sector consultants". Such a step would probably be more difficult than it sounds. What happens in the longer term? Yesterday's announcement only covered two years, after all.

But such quibbles will not stop the cabinet being fearful. Moreover, the Osborne proposal represents a relative shift of resources towards lower income (though not poor) households. As such its redistributive consequences would be broadly the opposite of the 10p tax debacle.

The fact that Osborne has made cleverly-engineered tax proposals two years running is perhaps evidence that the Conservatives are more fleet-of-foot than tired old Labour. There is surely a message there for Gordon Brown as he attempts to regain the political initiative.